YPF’s Falklands Crude Search With Petrobras, Cnooc May Give Shares 8% Lift

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  • Posted on April 15, 2011

    YPF SA (YPFD), Argentina’s largest oil company, may climb about 8 percent if it discovers crude in offshore drilling slated to begin later this year near the disputed Falkland Islands, an analyst said.

    YPF, controlled by Spain’s Repsol YPF SA (REP), may gain “$3.50 per share in a success scenario,” said Anish Kapadia, an analyst with Houston-based Tudor Pickering Holt & Co. LLC, who rates YPF a “buy.” “We assign a 10 percent success rate” the company will find oil in the Falklands, Kapadia said in an interview. The stock closed at $44.93 in New York yesterday.

    Argentina and the U.K., which went to war over the islands in 1982, had a diplomatic dispute last year after four British companies announced plans to drill in U.K.-controlled waters. Argentina claims sovereignty over the islands, which have been occupied by Britain since the beginning of the 19th century.

    A U.S. Geological Survey has said there’s a 50 percent chance the Falklands contain 4 billion barrels of crude.

    YPF rose 22 cents, or 0.5 percent, to $45.15 at 11:01 a.m. in New York Stock Exchange composite trading.

    Buenos Aires-based YPF heads a joint venture with Petrobras Energia SA, the Argentine unit of Brazil’s largest oil company, and Pan American Energy LLC, which is 50 percent owned by China’s Cnooc Ltd. (883), China’s largest offshore energy producer. The companies haven’t specified a date to start drilling for oil in Argentine-controlled waters.

    Commercial Discovery

    The three companies will use a ship called Stena Drillmax, owned by Aberdeen, U.K.-based Stena Drilling Ltd. The drillship has a water depth capacity of 10,000 feet (3,048 meters), according to Stena’s website.

    The ship is now drilling for Madrid-based Repsol in the Campos basin, offshore Brazil, according to the Brazilian oil regulatory agency’s website.

    Rockhopper Exploration Plc (RKH), based in Salisbury, England, has been the only company so far to make a potential commercial discovery in U.K.-controlled waters. The company said April 4 that the Sea Lion prospect may contain at least 516 million barrels of oil.

    Desire Petroleum Plc (DES) and Falkland Oil & Gas Ltd. (FOGL), both of the U.K., are also exploring for crude in the Falklands.

    A group including The Hague’s Royal Dutch Shell Plc drilled six wells in 1998 without making a commercial discovery in British waters.

    To contact the reporter on this story: Rodrigo Orihuela in Buenos Aires at rorihuela@bloomberg.net

    To contact the editors responsible for this story: Dale Crofts at dcrofts@bloomberg.net.


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